Global Information2020 stock market crash information
 | The examples and perspective in this article may not represent a worldwide view of the subject. (October 2020) |
 Movement of the Dow Jones Industrial Average (DJIA) between January 2017 and December 2020, showing the pre-crash high on 12 February, and the subsequent crash during the COVID-19 pandemic and recovery to new highs to close 2020. | |
| Date | 20 February 2020 |
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On 20 February 2020, stock markets across the world suddenly crashed after growing instability due to the COVID-19 pandemic. It ended on 7 April 2020.
Beginning on 13 May 2019, the yield curve on U.S. Treasury securities inverted,[1] and remained so until 11 October 2019, when it reverted to normal.[2] Through 2019, while some economists (including Campbell Harvey and former New York Federal Reserve economist Arturo Estrella) argued that a recession in the following year was likely,[3][4] other economists (including the managing director of Wells Fargo Securities Michael Schumacher and San Francisco Federal Reserve President Mary C. Daly) argued that inverted yield curves may no longer be a reliable recession predictor.[5][2] The yield curve on U.S. Treasuries would not invert again until 30 January 2020 when the World Health Organization declared the COVID-19 outbreak to be a Public Health Emergency of International Concern,[6][7] four weeks after local health commission officials in Wuhan, China announced the first 27 COVID-19 cases as a viral pneumonia strain outbreak on 1 January.[8]
The curve did not return to normal until 3 March when the Federal Open Market Committee (FOMC) lowered the federal funds rate target by 50 basis points.[9][10] In noting decisions by the FOMC to cut the federal funds rate by 25 basis points three times between 31 July and 30 October 2019,[11][12][13] on 25 February 2020, former U.S. Under Secretary of the Treasury for International Affairs Nathan Sheets suggested that the attention of the Federal Reserve to the inversion of the yield curve in the U.S. Treasuries market when setting monetary policy may be having the perverse effect of making inverted yield curves less predictive of recessions.[14]
During 2019, the IMF reported that the world economy was going through a 'synchronized slowdown', which entered into its slowest pace since the Great Recession. Weakness was exhibited in the consumer market as global markets began to suffer through a 'sharp deterioration' of manufacturing activity. Global growth was believed to have peaked in 2017, when the world's total industrial sector output began to start a sustained decline in early 2018. The IMF blamed 'heightened trade and geopolitical tensions' as the main reason for the slowdown, citing Brexit and the China – United States trade war as primary reasons for slowdown in 2019, while other economists blamed liquidity issues.[15][16]
The crash caused a short-lived bear market, and in April 2020 global stock markets re-entered a bull market, though U.S. market indices did not return to January 2020 levels until November 2020.[17][18][19][20][21] The crash signaled the beginning of the COVID-19 recession. The 2020 stock market crash followed a decade of economic prosperity and sustained global growth after recovery from the Great Recession. Global unemployment was at its lowest in history, while quality of life was generally improving across the world. However, in 2020, the COVID-19 pandemic, the most impactful pandemic since the Spanish flu, began decimating the economy.[22] Global economic shutdowns occurred due to the pandemic, and panic buying, and supply disruptions exacerbated the market. The International Monetary Fund had pointed to other mitigating factors seen pre-pandemic, such as a global synchronized slowdown in 2019, as exacerbants to the crash, especially given that the market was already vulnerable.[23][24][25][15][26][27]
- ^ Leong, Richard (13 May 2019). "TREASURIES-U.S. bond yields fall as China plans tariff retaliation". Reuters. Retrieved 17 May 2021.
- ^ a b Marte, Jonnelle (22 October 2019). "Treasury yield curve may be back to normal but U.S. economy is not". Reuters. Retrieved 17 May 2021.
- ^ Li, Yun; Insana, Ron (22 August 2019). "The economist who first linked the yield curve to recessions sees 'pretty high' chance of downturn". CNBC. Retrieved 18 May 2021.
- ^ Cox, Jeff (8 October 2019). "The father of the yield curve indicator says now is the time to prepare for a recession". CNBC. Retrieved 18 May 2021.
- ^ Gurdus, Lizzy (2 June 2019). "The yield curve is no longer a reliable recession predictor, according to Wells Fargo Securities". CNBC. Retrieved 18 May 2021.
- ^ Nedelman, Michael (30 January 2020). "World Health Organization declares coronavirus a public health emergency of international concern". CNN. Retrieved 18 May 2021.
- ^ Li, Yun (30 January 2020). "Part of yield curve inverts as 3-month rate tops 10-year". CNBC. Retrieved 17 May 2021.
- ^ "China investigating outbreak of respiratory illness". Canadian Broadcasting Corporation. Associated Press. 1 January 2020. Retrieved 18 May 2021.
- ^ Cox, Jeff (3 March 2020). "Fed cuts rates by half a percentage point to combat coronavirus slowdown". CNBC. Archived from the original on 4 March 2020.
- ^ Chavez-Dreyfuss, Gertrude (3 March 2020). "TREASURIES-U.S. yields mixed after Fed cuts rates by 50 basis points in coronavirus move". Reuters. Retrieved 17 May 2021.
- ^ Cox, Jeff (31 July 2019). "Fed cuts rate by a quarter point, cites 'global developments,' 'muted inflation'". CNBC. Retrieved 18 May 2021.
- ^ Borak, Donna (18 September 2019). "The Fed cut rates for the second time this year". CNN. Retrieved 18 May 2021.
- ^ Cox, Jeff (30 October 2019). "Fed cuts interest rates, but indicates a pause is ahead". CNBC. Retrieved 18 May 2021.
- ^ Oh, Sunny (25 February 2020). "The yield curve may be losing its predictive power because it's too closely watched, says former Fed official". MarketWatch. Retrieved 18 May 2021.
- ^ a b IMFBlog (15 October 2019). "The World Economy: Synchronized Slowdown, Precarious Outlook". IMF Blog. Retrieved 15 April 2020.
- ^ Barone, Robert. "A Strange New World: Economic Slowdown, Liquidity Issues". Forbes. Retrieved 15 April 2020.
- ^ Cite error: The named reference
CNBC World 2-28-2020was invoked but never defined (see the help page). - ^ Huang, Eustance (28 February 2020). "Seven major Asia-Pacific markets have tumbled into correction territory". CNBC. Archived from the original on 29 February 2020. Retrieved 24 March 2020.
- ^ Reinicke, Carmen. "Goldman Sachs now says US GDP will shrink 24% next quarter amid the coronavirus pandemic – which would be 2.5 times bigger than any decline in history". Business Insider. Archived from the original on 26 March 2020. Retrieved 24 March 2020.
- ^ Rabouin, Dion (4 January 2021). "Which asset classes performed best in the market frenzy of 2020". Axios. Retrieved 6 January 2021.
- ^ Smith, Elliot (December 2020). "World stocks outperform the U.S. In bumper November". CNBC.
- ^ Martin, Wes; Chakrabarti, Meghna. "What The 1918 Flu Pandemic Teaches Us About The COVID-19 pandemic". WBUR. Retrieved 24 March 2020.
- ^ Karabell, Zachary. "A Market Crash Was Coming, Coronavirus Was Just the Spark". Time. Archived from the original on 2 March 2020. Retrieved 24 March 2020.
- ^ Pankratyeva, Alexandra. "Top three reasons behind the stock market crash 2020: is it coronavirus, oil price war or vanished liquidity?". capital.com. Retrieved 24 March 2020.
- ^ Partington, Richard; Wearden, Graeme (9 March 2020). "Global stock markets post biggest falls since 2008 financial crisis". The Guardian. ISSN 0261-3077. Archived from the original on 14 March 2020. Retrieved 15 March 2020.
- ^ Gurdus, Lizzy (10 October 2019). "'Yellow flag on recession risk': Top forecaster warns of cracks in consumer spending". CNBC. Retrieved 15 April 2020.
- ^ Lakshman Achuthan; Anirvan Banerji. "Opinion: Here's what is really causing the global economic slowdown". CNN. Retrieved 15 April 2020.